US Airline industry begins to bounce back

The US besieged airlines bottomed out in March and April, and are bouncing back — though not very high. Chastened by past predictions of recovery that were way off, few in or around the airline business are ready to declare a recovery just yet. But results from May that have been announced so far include several modestly positive traffic and revenue surprises.

Continental Airlines, the only big airline that gives monthly guidance on revenue performance, said its revenue per seat mile was up 1% to 3% vs. May 2002. That´s not much, but compared with April´s 1.1% decline, it is a significant jump, the USA Today daily commented.

American Airlines, the world´s largest carrier, said Tuesday "better-than-expected systemwide traffic for May" drove its load factor, or percentage of filled seats, up 4.1 percentage points from a year ago to 73.7%. Passenger traffic was down 4.8% in May. But capacity was down 10.1%.

In a report Tuesday, Deutsche Bank analyst Susan Donofrio said the worst has passed for the airlines. The airline stocks she follows are "on track to either meet or beat (earnings per share) expectations for the June quarter."

Delta CEO Leo Mullin, speaking at a conference in Washington on Monday, warned against too much optimism. A true "uplift" isn´t likely until mid- or late 2004, he said.

Still, anecdotal evidence supports the idea that a modest, fragile recovery has begun.

• "All the vital signs, which include advance bookings, load factors and average fares, all seem to be moving in ever-so-slightly the right direction," says Jonathan Ornstein, chief executive of Mesa Airlines, a large regional carrier.

• Ron DiLeo, chief operating officer of Rosenbluth International´s corporate travel business, says his mega-agency´s ticket sales have risen each week since the war ended and are now up 15% to 20% from the low point. "It´s more than a blip," he says. "It´s directly related to pent-up demand for travel. I don´t know of a CEO or COO on the planet that´s not driving growth aggressively."

• An Accenture survey of 1,600 business travelers due out today says 81% plan to travel as much or more during the rest of the year as they have thus far. About 41% fell into the "will travel more category," up from 35% in the last such survey six months ago.

"Business travel is on the increase, and the economy is in fact starting to get a little better," says Julian Sparkes of Accenture. "People are less concerned about geopolitical and SARS-related issues."

But it´s a modest improvement. "Nobody´s opening up the champagne yet," he says.